The Analytics Mandate

As analytics becomes a common path to business value, many companies are changing how they make decisions, operate and strategize.

May 12, 2014

by: David Kiron, Pamela Kirk Prentice and Renee Boucher Ferguson

Based on a global executive survey with 2,000+ respondents and interviews with more than thirty executives, MIT Sloan Management Review and SAS Institute Inc. report that analytics has become a common path to business value. Organizations are now being challenged to step up their use of analytics, whether they are just getting started or are seasoned practitioners. The implications for industry competition are coming into focus—companies that incorporate analytics into their culture are finding success in the new digital era.

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Few know the thrill of victory using big data better than the U.S. statistician and writer Nate Silver. His accurate prediction of the 2012 U.S. presidential election results for all 50 states made him the toast of Washington, D.C., elevating him to the status of celebrity geek. Television host Jon Stewart of The Daily Show called him “Lord and god of the algorithm.”1 Indeed, Silver’s abilities to identify the right data sources, ask the right questions and apply the right math have turned Silver into gold.

Silver now spends much of his time talking data and managing a staff of analysts who immerse themselves in statistics and information. They discuss data and make predictions on Silver’s website, fivethirtyeight.com, about everything from basketball tournaments to job growth. Though their predictions are often interesting, if not always accurate, Silver and his team are under intense pressure to stay relevant — and right. How do you sustain your momentum when you’re only as good as your last prediction?

And so it goes with the new world order of big data and analytics. As more organizations make better use of data, the path to value with analytics is getting crowded — and longer. Many companies find they must reconsider and refresh not only their analytical insights, but also the organizational factors necessary to turn insight into advantage.

This report, based on a survey of 2,037 professionals and interviews with more than 30 executives, reveals the pressure companies are under to both improve their analytics capabilities and find unique and relevant insights in their data — to try to be as good as their last prediction every single day. (See “About the Research.”)

As more companies look to analytics to gain an advantage, achieving such gains is becoming more difficult. That is, as analytics becomes a more common path to value, the implications for industry competition are coming into focus.

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About the Authors:

David Kiron is the executive editor of MIT Sloan Management Review’s Big Ideas Initiative. He can be reached at dkiron@mit.edu.

Pamela Kirk Prentice is the chief research officer at SAS Institute Inc., specializing in deriving insights from qualitative and quantitative information to help address key business issues. She can be reached at pamela.prentice@sas.com

Renee Boucher Ferguson is the Data & Analytics contributing editor at MIT Sloan Management Review, researching the current and new analytical approaches that change how executives make decisions and innovate. She can be reached at rbfergus@mit.edu.

14. Having an analytics culture does not require that all business questions addressed with analytics utilize in-house skills and technology. Analytics outsourcing is a growing trend that may be an option for certain business issues, whether companies have sophisticated or unsophisticated analytics capabilities. One limiting factor in these relationships, though, is outsourcing the analysis of strategically valuable data. A recent article on this topic in MIT Sloan Management Review quoted an analytics BPO manager: “We know we can add a lot more value to our customer’s analytics program if they came to us with a more strategic outsourcing arrangement, where we could be responsible for a certain aspect of their competitive analytics program that our capabilities have shown to be superior. If we suggest this to our customers, they usually become threatened, and this can put the overall relationship at risk.” From David Fogarty and Peter C. Bell, “Should You Outsource Analytics,” MIT Sloan Management Review, Winter 2014, pp. 41-45.

17. This quote first appeared in David Kiron, Pamela Kirk Prentice and Renee Boucher Ferguson, “From Value to Vision, Reimagining the Possible with Data and Analytics,” MIT Sloan Management Review, March 5, 2013. Quote is on p. 5.

1 Comment On: The Analytics Mandate

Peter Bonisch | May 13, 2014

Nate Silver’s psephological work is of a commendably high standard. But there is a world of difference from electoral predictability to most business analysis. ‘Big data’ is a buzzword for application of sensible questions to large data sets; no matter how big the data set, the utility is driven by the validity and applicability of the question, even before one begins to consider the provenance of the data. Most firms are a long way from formulating sensible questions with which do interrogate the data sets they have available. The problems remains interpretive, rather than analytical.